The economist the jobs crisis

Print edition March 14th 2009The world this week Politics this week Business this week KAL's cartoon Leaders World economy The jobs crisis The London summit The better part of valour B

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Print edition March 14th 2009

The world this week

Politics this week Business this week KAL's cartoon

Leaders

World economy

The jobs crisis

The London summit

The better part of valour

Barack Obama's foreign policy

All very engaging

Sudan

Compounding the crime

America and climate change

Cap and binge

Science and the president

A new era of integrity, sort of

Barack Obama and education

The teacher-in-chief speaks

The death penalty

Saving lives and money

Africa policy

Don't expect a revolution

3D viewers

The final reel

Pennsylvania's burning mines

Fire in the hole

On the trail with a megastar

Kidnapping Hmong women in Vietnam

Bartered brides

Indonesia's parliamentary election

The jobs crisis

It's coming, whatever governments do; but they can make it better or worse:

leader

A special report on entrepreneurship

Global heroes All in the mind

An idea whose time has come The United States of Entrepreneurs The more the merrier

Lands of opportunity Magic formula Saving the world The entrepreneurial society Sources and acknowledgments Offer to readers

Flying the flag

Continental and Schaeffler

Losing its bearings

When jobs disappear

Finance and economics

The next domino?

The Madoff affair

Going down quietly

Economics focus

A Plan B for global finance

Science & Technology

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China and America spar at sea

Naked aggression

A missing Thai human-rights lawyer

More questions than answers

North Korea

Sound and fury

Afghanistan's Uruzgan province

The Dutch model

Middle East & Africa

Shaik, rattle and release

Arab diplomacy and the Palestinians

Try to avoid embarrassment again

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The state and the economy: Germany

How to restart the engine?

The state and the economy: France

Back in the driving seat

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Silvio, the actress and the law

School killings in Germany

Not just an American horror

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Repairing the bridge

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The toxins trickle downward

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Politics this week

Mar 12th 2009

From The Economist print edition

Northern Ireland threatened to return to sectarian violence after republican

splinter groups staged two separate gun attacks that killed two soldiers and a

policeman Thousands gathered outside Belfast’s city hall to protest against the

threat to the decade-old peace process Martin McGuinness, deputy first

minister in the province’s power-sharing government and a leading ex-member

of the IRA, denounced the dissidents as “traitors” See article

President Nicolas Sarkozy confirmed that France would return to NATO’s

integrated military command, 43 years after Charles de Gaulle pulled the

country out A week before parliament votes on the move, he argued that it

would not compromise France’s strategic independence, but make it “stronger

and more influential” A poll suggested that 52% in France approved

A teenager in Germany shot and killed 15 people as he went on the rampage with a pistol at his former

school near Stuttgart He engaged police in a shoot-out at a car dealership and then apparently shot

himself In America a man went on a gun spree in Alabama, killing five relations and five bystanders

before shooting himself See article

Georgia pulled out of May’s Eurovision Song Contest, to be held in Moscow, when its entry was banned for taking a potshot at Vladimir Putin, Russia’s prime minister The ditty was titled “We Don’t Wanna Put

In”; Mr Putin is apparently “killin’ the groove”

The party’s over

Brazil’s economy shrank by 3.6% in the fourth quarter of 2008 compared with the previous three

months, faster than expected and the worst quarterly performance for a decade

Bolivia’s president, Evo Morales, expelled an American diplomat whom he accused of conspiring to

infiltrate the state oil company on behalf of the CIA The United States dismissed the claim as baseless The oil company’s president, a senior figure in Mr Morales’s Movement to Socialism, was recently sacked and arrested on suspicion of orchestrating a corruption racket See article

Defence ministers from all 12 South American countries held an inaugural meeting of the South

American Defence Council, set up to try to forge a common defence policy and share information

about military spending in the region

Power play

Hillary Clinton, America’s secretary of state, and Yang Jiechi, China’s foreign

minister, held talks in Washington to pave the way for a presidential meeting

between Barack Obama and Hu Jintao next month The atmosphere was

clouded by mutual accusations over an incident in the South China Sea in which

America said one of its ships was harassed by Chinese vessels See article

In a speech marking the 50th anniversary of the abortive uprising that led to his

flight into exile, the Dalai Lama, Tibet’s spiritual leader, made some of his

harshest criticisms of Chinese rule in his homeland He continued, however, to

call for a “middle way” for Tibet, short of independence

The publisher of a popular online newspaper in Thailand, Prachatai, was arrested after a reader posted a

comment deemed offensive to the monarchy

PA

Getty Images

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As South Korea and America conducted annual joint military exercises, North Korea complained bitterly

and gave warning of the risk of a nuclear war

Police in Pakistan arrested dozens of lawyers and opposition activists ahead of a four-day

anti-government protest march calling for sacked judges to be reinstated The beginning of the march was marked by violence

A suicide-bombing in the south of Sri Lanka, which killed at least 15 people, was blamed on the rebel

Liberation Tigers of Tamil Eelam

A new age of reason

Barack Obama signed an order overturning a ban on federal funding for embryonic stem-cell research

The ban was brought in by George Bush in 2001 on moral grounds and was a touchstone policy for religious conservatives Mr Obama said that America had been presented with a false choice between religion and science See article

A $410 billion spending bill that sees the government through to the end of the fiscal year was signed The bill contains measures that loosen restrictions on Cuban-American visits to family in Cuba and eases

existing food and medical trade with the island

Charles Freeman withdrew his nomination as head of the National Intelligence Council The former

ambassador to Saudi Arabia blamed carping from the Israeli lobby And the hunt for a new

surgeon-general intensified after the front-runner, Sanjay Gupta, a doctor and media star, said he didn’t want

the job

Look who’s talking

Egyptian mediators said the two main Palestinian factions were making progress towards settling their

differences in the hope of eventually forming a unity government Meanwhile, American emissaries met

Syria’s President Bashar Assad in Damascus and Britain said it would talk to Lebanon’s pro-Syrian Shia

party-cum-militia, Hizbullah See article

Two suicide-bombings in Iraq killed at least 57 people, showing that the jihadist insurgency, though

much weakened, is by no means over The first attack hit a police academy in Baghdad; the second, three days later, struck at a meeting of tribal leaders in Abu Ghraib, a district to the city’s west, where they were attending a reconciliation conference

An Iraqi journalist who threw his shoes at George Bush on a visit to Baghdad last year was jailed for

three years

The wife of Zimbabwe’s new prime minister, Morgan Tsvangirai, was killed

when a car in which the couple were travelling was hit by a lorry Suggestions

that there had been foul play sounded implausible President Robert Mugabe,

with whom Mr Tsvangirai is now awkwardly sharing power, visited his rival in

hospital and later spoke graciously about Mrs Tsvangirai

Madagascar’s political crisis deepened after pro-opposition soldiers forced the

resignation of the head of the army He had earlier given the country’s political

rivals, President Marc Ravalomanana and the opposition leader, Andry

Rajoelina, 72 hours to settle a dispute that has brought the island to the verge

of civil war

EPA

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Business this week

Mar 12th 2009

There were more big mergers in the drug industry Merck announced that it would buy

Schering-Plough, its smaller New Jersey rival, for $41 billion Merck will take on $8.5 billion in debt to help pay for the deal And an offer by Switzerland’s Roche for the 44% of Genentech that it does not already own

was accepted by the American biomedical company’s board Roche will pay $46.8 billion after raising its offer for a second time See article

Dow Chemical came to an agreement with Rohm & Haas in which it will now buy the specialty materials

company A court case brought by Rohm to force Dow to complete the deal was due to be heard this week Dow tried to pull out of the acquisition when its financing for the transaction fell apart Rohm’s legal action was being keenly watched for any changes to the law regarding obligations to finish deals entered into before the start of the financial crisis

Bernie Madoff was expected to plead guilty to charges relating to his Ponzi scheme, the biggest fraud in

history See article

A former banker and four others were convicted in the first trial for insider dealing in Hong Kong, which

its Securities and Futures Commission hailed as a “landmark decision” The regulator had a busy week, also investigating whether traders were improperly shorting shares in HSBC

Quarterly dividend

Vikram Pandit disclosed that Citigroup had a profitable first two months this year, and that, so far, the

bank was turning in its best quarterly performance since 2007 Citi’s boss divulged the information in an internal memo that was leaked, causing Citi’s share price to rise from its death bed, having fallen to around $1 Mr Pandit’s optimism spurred a rally in stockmarkets; the volume of trading in Citi shares was the fourth-largest on record

Lloyds Banking Group joined the British Treasury’s Asset Protection Scheme The bank will place toxic

loans worth £260 billion ($359 billion) in the scheme, most of them from HBOS, a distressed lender it took over in a government-backed rescue Lloyds is also converting preferred shares it issued to the Treasury last year into ordinary shares If investors do not subscribe to the offer, the government will buy the shares, raising taxpayers’ stake in the bank

The Bank of England’s first action under its quantitative easing programme was deemed a success when

its offer to purchase £2 billion ($2.8 billion) of government bonds was five times oversubscribed The central bank aims to buy back £75 billion of gilts and corporate bonds to boost the supply of credit, in effect creating new money See article

Do numbers matter any more?

Freddie Mac made a loss of $23.9 billion in the fourth quarter and said it would need an extra $31 billion

from the government Fannie Mae, its sister company, recently reported a quarterly loss of $25.2 billion The companies account for 43% of America’s home-mortgage market

UBS said its net loss for 2008 was actually SFr1.2 billion ($1.1 billion) more than it had first stated,

mostly because of its settlement with America’s Justice Department over clients who avoided tax The Swiss bank’s restated loss for last year is SFr20.9 billion

Neiman Marcus recorded a quarterly net loss of $509m for the 13 weeks to January 31st Sales at the

high-end store chain fell by 20% compared with a year earlier

Standard & Poor’s downgraded its AAA credit rating for GE and GE Capital, the conglomerate’s finance

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arm (which earlier sold $8 billion in government-backed debt) It is a blow to the company and Jeffrey Immelt, its boss GE’s share price has come under pressure amid speculation it would lose the rating, which it has held for over five decades See article

Audi reported a rise of 30% in profit after tax for 2008, its best year for sales Still, the German carmaker said it expects 2009 to be hard Volkswagen, Audi’s parent, recently posted a 14% increase in annual

profit

China’s exports plunged again in February, by 26% compared with the same month in 2008 Imports fell

by 24% But there was some good news for carmakers A cut in the tax on cars in China helped sales there climb by 25% in February See article

Beggar thy neighbour

The World Bank forecast that the global economy is likely to shrink this

year for the first time since the second world war In a paper prepared

ahead of a meeting of finance ministers and central bankers from the G20,

the bank gave warning of a jump in world poverty if private-sector

creditors continue to shun developing countries, which face a potential

financing shortfall of up to $700 billion The bank also said that the rise in

protectionist measures imposed since the start of the credit crisis

presented a “serious threat in the current environment” See article

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World economy

The jobs crisis

Mar 12th 2009

It’s coming, whatever governments do; but they can make it better or worse

NOTHING evokes the misery of mass unemployment more than the photographs of the Depression You can see it in the drawn faces of the men, in their shabby clothes, in their eyes Their despair spawned political extremism that left a stain on society; but it also taught subsequent generations that public policy has a vital part in alleviating the suffering of those who cannot get work Thanks to welfare

schemes and unemployment benefits, many of which have their origins in those dark days, joblessness

no longer plunges people into destitution, at least in the developed world

Not even the gloomiest predict that today’s slump will approach the severity of the Depression, which shrank America’s economy by more than a quarter, and put a quarter of the working-age population out

of a job But with the world in its deepest recession since the 1930s and global trade shrinking at its fastest pace in 80 years, the misery of mass unemployment looms nonetheless, and raises the big

question posed in the Depression: what should governments do?

Join the queue

In the rich world the job losses are starkest in America, where the recession began Its flexible labour market has shed 4.4m jobs since the downturn began in December 2007, including more than 600,000 in each of the past three months The unemployment rate jumped to 8.1% in February, the highest in a quarter-century An American who loses his job today has less of a chance of finding another one than at any time since records began half a century ago That is especially worrying when the finances of many households have come to depend on two full incomes

But it is already clear that unemployment will strike hard far beyond America and Britain In Japan output

is plunging faster than in other rich economies Although unemployment is low, rapid job losses among Japan’s army of temporary workers are exposing the unfairness of a two-tier labour market and straining

an egalitarian society

In Europe joblessness has grown fastest in places such as Spain and Ireland, where building booms have crashed, but has only begun to edge up elsewhere The unemployment rates in many European countries are below America’s, but that may be because their more rigid labour markets adjust more slowly to falling demand Given how fast European economies are shrinking, nobody doubts that worse lies ahead

By the end of 2010, unemployment in much of the rich world is likely to be above 10% (see article)

Illustration by Belle Mellor

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In the emerging world the pattern will be different, but the outcome more painful As trade shrinks, millions of workers are losing their foothold on the bottom rungs of the global supply chain Poverty will rise as they sink into informal work or move back to the land The World Bank expects some 53m people

to fall below the level of extreme poverty this year (see article)

Politics dictates that governments must intervene energetically to help That’s partly because capital has taken such a large share of profits for so many years that the pendulum is bound to swing back and partly because, having just given trillions of dollars to the banks, politicians will be under pressure to put vast amounts of money into saving jobs But help cannot be measured in dollars alone Badly designed policies can be self-defeating After the recessions of the 1970s and early 1980s, Europe’s rigid labour-markets kept unemployment high for decades

Governments are piling in with short-term help for workers In America, which has one of the lowest social safety nets in the rich world, extending unemployment benefits was, rightly, part of the recent stimulus package Japan is giving social assistance to “non regular” workers, a group that has long been ignored In general, however, it makes more sense to pay companies to keep people in work than to subsidise unemployment Many countries are topping up the earnings of workers on shortened weeks or forced leave

These are sensible measures, so long as they are time-limited; for, in the short term, governments need

to do all they can to sustain demand But the jobs crisis, alas, is unlikely to be short-lived Even if the recession ends soon (and there is little sign of that happening), the asset bust and the excessive

borrowing that led to it are likely to overshadow the world economy for many years to come Moreover, many of yesterday’s jobs, from Spanish bricklayer to Wall Street trader, are not coming back People will have to shift out of old occupations and into new ones

A difficult dance

Over the next couple of years, politicians will have to perform a difficult policy U-turn; for, in the long term, they need flexible labour markets That will mean abolishing job-subsidy programmes, taking away protected workers’ privileges and making it easier for businesses to restructure by laying people off Countries such as Japan, with two-tier workforces in which an army of temporary workers with few protections toil alongside mollycoddled folk with many, will need to narrow that disparity by making the latter easier to fire

The euphemism for that is “flexibility” The bare truth is that the more easily jobs can be destroyed, the more easily new ones can be created The programmes that help today, by keeping people in existing jobs, will tomorrow become a drag on the great adjustment that lies ahead As time goes by, spending

on keeping people in old jobs will need to be cut, and replaced with spending on training them for new ones Governments will have to switch from policies to support demand to policies to make their labour markets more flexible That is going to require fancy political footwork; but politicians will have to

perform those steps, because if they fail to, they will stifle growth

However well governments design their policies, unemployment is going to rise sharply, for some time

At best it will blight millions of lives for years The politicians’ task is to make sure the misery is not measured in decades

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The London summit

The better part of valour

Mar 12th 2009

The G20 summit in London is setting out to do too much It should concentrate on what needs doing right now

THE list that the leaders are drawing up for the G20 summit in London on April 2nd is an impressive one All the items on it are problems that everybody wants dealt with But this is not the time to talk of how to redesign regulation and predict future crises: this is the time to save the world economy and trading system When the house is burning down you concentrate on putting out the fire, not on preventing future ones

Cut to London

The London summit is a second act, after an emergency G20 get-together in Washington, DC, during the last months of the Bush presidency That offered little besides vague reassurances—its most useful step was to include up-and-coming economies such as China, India and Brazil, as well as the has-beens in the G8 Since then the world economy has plunged into recession and governments have had time to work

up their plans A lot of people are banking on success in London (see article) Vague reassurances will not do

Mindful of that—and his own weak position at home—Gordon Brown, Britain’s prime minister, drew up an epic agenda The summit should not only stimulate the economy and renounce protectionism, but also bolster the IMF and other international financial outfits, revamp regulation, create an early-warning system for crises, and save the poor It was as if Mr Brown thought the ailing economy would yield to an act of governmental will, if only it were colossal enough

But by overreaching itself, the summit looks likely to weaken the politicians’ efforts There is just too much to do in a day—especially because the Americans, understaffed and overworked, seem lamentably unprepared to take the initiative A big agenda can give everyone something they want, but it can also give everyone something to disagree about Americans are suspicious of the European desire for a

system of global regulation that may threaten their sovereignty (see article); Europeans do not agree with American demands that governments spend yet more money—partly because they are worried about the size of the state (see article); Asians, who blame America and Britain for the crisis, do not want a souped-up IMF unless they have a greater say in how it is run The summit may agree on

minutiae like tax havens (none of which will be represented) and bankers’ bonuses (nobody loses votes bashing bankers) But on the important stuff, the stage is set for disappointment

Illustration by David Simonds

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The leaders in London should put other matters aside and devote themselves to the two things that matter most today First is a beefed-up government stimulus America is right to argue that private-sector demand has collapsed, leaving the public sector as the engine of the economy Governments such

as China’s have spent freely (see article), but some could do more One step would be to treble the IMF’s resources, to $750 billion, so that it can give more help to emerging economies (the vexed question of how to run the fund can wait) Another is for countries to meet the IMF’s call for a co-ordinated stimulus

of 2% of world GDP Not only would that be more effective, but it would also help mitigate the leakage of public spending abroad

The second priority is to present a united front against protectionism This does not just mean fine words They are too easy to ignore The London summit should promise tariff cuts and pledge to put aside the arsenal of legal trade protection, such as anti-dumping suits, which have been surging lately, and to ensure that subsidies do not discriminate against foreign companies If the world’s leaders could

do those two things, they would be doing the best they can

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Barack Obama's foreign policy

All very engaging

Mar 12th 2009

America’s president has made a good start in foreign policy But the hard choices are still to come

FOR impeccable reasons, Barack Obama has concentrated since becoming president on fixing America’s economy On foreign policy, he has only sketched the outline Soon, however, he must start to fill in some details Early next month he goes to Europe for the G20 summit on the world economy, NATO’s 60th birthday party in Strasbourg and a meeting with the European Union in Prague He intends on the same trip to take in Turkey, thus fulfilling a promise to make an early visit to a Muslim country and start mending relations with the Islamic world When he visited Europe as a candidate last summer, 200,000 Berliners cheered him to the skies This time, he will be expected to put substance behind the magic

So far, the outline at least is fine Mr Obama has resisted the temptation to tear up every one of George Bush’s policies, but he has transformed the tone The fight against al-Qaeda is to continue, but without the preaching that alienated America’s allies or the torture that betrayed its values He is pulling out of Iraq, but on a cautious timetable He is sending more troops to Afghanistan, but reviewing the strategy

of a war he admits America is failing to win He is extending his hand to adversaries, but without yet making America look like a soft touch

This belief in “engaging” is so far the most visible element of the emerging Obama doctrine Mr Obama, it seems, is not a man to push foes into a corner or stick rude labels on them, as Mr Bush did Iran and Syria are no longer rogue regimes beyond polite society: the band formerly known as the “axis of evil” is being summoned to join the conversation Iran may have armed the Taliban but is invited to a “big tent” meeting on Afghanistan Syria may have ordered the assassination of a former prime minister of

Lebanon, but Hillary Clinton, Mr Obama’s secretary of state, has sent her officials to patch up relations with Bashar Assad Russia invaded Georgia, but, hey, that was last summer Now the NATO-Russia Council is to resume meetings and Mr Obama is renewing long-stalled talks with Russia on cutting

nuclear weapons (see article)

Those who believe, as the neocons did, that the focus of foreign policy should be to promote liberal democracy, will find much to disapprove of But a policy of pinching one’s nose and engaging with

malodorous regimes has its merits It treats the world as it is, not as it should be, and it gives awkward customers a chance to change course and co-operate with America without losing face To foreign-policy realists, that is a nice change from the with-us-or-against-us approach of Mr Bush’s first term, when a lot

of countries voted against

AP

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Not just a nice guy, thank goodness

On the other hand, the test of a policy based on realism is whether it delivers results, and engagement

on its own, as Mr Bush discovered in his chastened second term, seldom alters the behaviour of regimes that think they are acting rationally in their own vital interests Look at North Korea, still threatening war after diplomats have spent bottom-numbing years in talks (see article) Or at Iran, which talked and talked to well-meaning Europeans but still insists on its nuclear “rights” (ie, the right to get within a screwdriver’s turn of a bomb) Talk, even from a president as winning as Mr Obama, needs to be

accompanied by some hard-edged diplomacy

Has Mr Obama got the necessary hardness? So it seems His decision to reinforce the war in Afghanistan while scaling down in Iraq shows that he is not afraid to use America’s military power (though we think

he should have stopped America’s counterproductive air raids on terrorists in Pakistan) He recently told Russia that if it helps stop Iran going nuclear, America might drop the plan Russia loathes to station missile defences in Poland and the Czech Republic This points to a diplomacy based on a shrewd trading

of interests, not—despite all that disarming courtesy—a naive faith that noxious regimes will show goodwill just because they are treated with respect

What remains unclear is not whether Mr Obama is clever or tough It is his basic reading of the world Does he see China more as a rival than an ally? Too soon to say Is Afghanistan winnable? Watch that review Is Palestine solvable? Mrs Clinton’s recent visit, showing sympathy but changing no policy

(Hamas remains beyond the pale), leaves the question dangling Will he risk pre-emption against Iran or does he believe it can be contained? The mullahs would love to know

The first big clue to Mr Obama’s instincts may come in his treatment of Russia A few months ago it looked as if the NATO meeting in April would take place in the shadow of a Russia still in macho mode after the Georgia war and confident of bobbing to riches on oil and gas To its own surprise, Russia is now a casualty of the world recession

This does not make America’s policy simpler A Russia with a wrecked economy may become even less congenial Mrs Clinton speaks of “managing” differences where they persist, while standing firm on principles and vital interests But what if interests and principles collide? America says Russia has no right to bully neighbours such as Georgia and Ukraine But Russia can offer vital help on Iran So far, Mr Obama has not had to confront these hard choices Soon he will

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Compounding the crime

Mar 12th 2009

The case against Omar al-Bashir has opened a fissure between those who support justice and those who fear it

GIVEN the history of the Sudanese government’s brutal treatment of the population of Darfur, some adverse reaction to last week’s indictment of President Omar al-Bashir by the International Criminal Court (ICC) was expected—but nothing quite as bad as what happened A dozen major international aid agencies and a couple of local ones were immediately expelled from Darfur, and many from the country altogether; staff were unceremoniously escorted to waiting planes while their computers, files and much else were confiscated by the authorities The remaining aid agencies have been put on notice, and could

be next

The NGOs that were expelled from Sudan provided much of the food, water and medicine to the 2.75m refugees who live in temporary camps in Darfur So this move is, above all, a huge blow to the fragile humanitarian lifeline that has been keeping the wretched victims of the Darfur conflict alive By some estimates, the NGOs that have been kicked out contributed 80% of the workers who distributed the World Food Programme’s aid in Darfur—the people, that is, who actually gave the food to the refugees in the camps They also maintained boreholes and water pumps in the camps Without clean water,

diseases are likely to spread quickly Meningitis has already struck one camp

The Sudanese government has given no official explanation for the expulsions, but has made spurious allegations that all these aid agencies were involved in a conspiracy to supply the ICC with the evidence

to prosecute Mr Bashir and his henchmen More to the point, the Sudanese government evidently has no backup plan to replace the vital services the NGOs provided Although it is clear that the expulsions were planned carefully in advance, it is equally clear that no thought was given to who would do the expelled workers’ jobs instead This makes the action doubly callous As usual, it is the ordinary Darfuris who will bear the burden of the government’s vindictiveness

Since 2003 about 300,000 people have died as a result of the fighting in Darfur Before more do, the world should therefore push hard to make Sudan reverse its decision At the very least, Mr Bashir should

be pressed to let the 2,000 or so Sudanese nationals who worked for the expelled aid agencies be employed by the smaller NGOs that remain Their expertise could save the lives of thousands of Darfuris

re-If the government does nothing, and thus causes even more deaths, they should be added to Mr Bashir’s charge-sheet

Not enough just to say “should”

Reuters

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Yet the attitude of many countries over the past week to the ICC’s indictment has been worse than disappointing Many have expressed dismay at the ICC’s decision and yet said nothing about the

expulsion of the aid agencies China, long Sudan’s main backer, blocked a mere press statement from the UN Security Council that would have condemned Mr Bashir’s government for the move Such

countries say they want the Security Council to defer the ICC’s indictment, on the ground that seeking justice against Mr Bashir will upset the “peace process” in Darfur They would have a reasonable point if there were indeed a genuine peace process under way which the indictment would jeopardise But Mr Bashir has long since emptied the process of meaning His government has done nothing to bring any of the mass killers to justice In these circumstances, the ICC has become the last resort

Mr Bashir’s cry that the ICC is a weapon of Western “neo-colonialism” has gone down well with some African governments, many Arab leaders and Iran Not all African countries have rallied to his support, however Sierra Leone, for instance, which experienced horrors rather like Darfur’s, has become a strong proponent of justice and a firm believer in the part it must play in ending conflicts Most African

governments subscribe to a “peer review” mechanism that invites them to judge each other’s human rights records Few, unfortunately, take this seriously

The court’s decision gets more support from ordinary people Darfuris themselves are well aware of how they might be punished for backing the ICC; yet, despite the indictment of two Darfuri rebel leaders along with members of the government in Khartoum, it is hard to find anyone aside from Mr Bashir’s few Arab supporters in the main towns who opposes the court’s action Justice matters even—perhaps especially—to people who have nothing

Now that Mr Bashir has compounded his original crime, it is all the more important that he should be put

in the dock To get him there, countries that believe in justice must throw all their political weight behind the indictment Some poor-country governments, fearful that they too might one day be held to account for their actions, will inevitably attack this as “neo-colonialism” Too bad

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America and climate change

Cap and binge

Mar 12th 2009

America’s politicians are at last getting to grips with global warming, but in a dangerously expensive way

THE power plant that heats Congress produces more carbon dioxide than any other facility in

Washington, DC It is almost 100 years old and runs partly on coal, a grubby fuel Last week, protesters marched on it, urging Congress to cut its own emissions of greenhouse gases and to oblige the rest of America to do so as well

The first demand was easily met: the leaders of the House of Representatives and the Senate instructed their staff to convert the plant to run on natural gas, which burns more cleanly than coal But the second one is proving trickier Congress is just beginning to grapple with laws to regulate greenhouse gases (see article), at the behest not just of protesters but also of Barack Obama, who has long advocated vigorous measures to curb global warming Bringing about a wholesale change in America’s energy supply will be

a challenge, to say the least And the sort of measures that are currently finding favour in Washington will make it harder still

The president is right to want to cut emissions The alternative, allowing climate change to take its course, would be far more damaging to America and the world The economic impact of rising sea levels, reduced crop yields, fiercer storms and many other doleful consequences would be devastating

But fighting climate change will be costly It will involve swapping cheap but dirty fuels for cleaner but dearer ones, as Congress intends, as well as building lots of expensive new power plants to replace older, more polluting ones That in turn will lead to higher electricity and fuel prices Despite the president’s airy talk of green jobs, cutting emissions, by almost all calculations, will increase costs for most businesses and families Those extra costs must be kept to a minimum

Mr Obama’s preferred device for cutting emissions, a cap-and-trade scheme, is designed to do just that

It involves placing a limit on the volume of emissions that can be produced around the country each year, and then auctioning tradable permits to pollute The intention is to encourage firms that find it cheap to cut emissions to do so, while allowing those with no easy means to pollute less to buy permits instead Politicians and bureaucrats, meanwhile, do not need to identify where emissions cuts should be made; the market takes care of that for them

Sunshine and moonshine

EPA

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Many congressmen are unconvinced There is a general worry that the required emissions cuts will be harder than expected to find, pushing up the cost of the permits and thus flattening an already slouching economy And there are particular fears that, even if the system works well enough overall, states that rely heavily on coal, heavy industry or some other sooty activity will suffer badly.

Both the president and cap-and-trade’s supporters in Congress seem inclined to respond with subsidies for pet technologies that might help those hardest hit, or with mandates to cut emissions in particular ways The president, for example, wants to double the amount of electricity that comes from renewables, meaning wind farms, solar-power plants and the like Handouts for hybrid cars and for coal plants with low emissions are also popular

The main effect of these schemes would be to raise the costs of cutting emissions Much of the money doled out by the government would inevitably be wasted, adding to the overall bill for fighting climate change Worse, such measures would risk distorting the carbon market, steering private capital as well

as public money away from the cheapest technologies and towards those that have caught the eye of the politicians

Under the stimulus bill, renewables benefit from a tax credit, grants, loan guarantees and an expensive overhaul of the electric grid No wonder that each tonne of emissions avoided thanks to the measures in the stimulus to encourage renewable energy would cost somewhere between $69 and $137, according to

a recent study Under a cap-and-trade scheme, the price would be less than $15 to begin with, by most accounts

There are some green things on which the government could usefully spend money Investments in energy efficiency—of which the stimulus package included a lot—are particularly worthwhile Increasing the budget for advanced scientific research may yield technological breakthroughs But on the whole, government intervention is only likely to raise the cost of mitigating climate change Fat handouts may make the politics of going green easier in the short run, but in the long run they will make it harder

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Northern Ireland

Just when you thought it was safe

Mar 12th 2009

A spate of killings must not block the path to full power-sharing

IT LOOKED like a scene from the bad old days Two British soldiers at a base in Antrim took delivery of a last pizza before deploying to Afghanistan and were mown down in the street A Northern Ireland police officer answered a call in Armagh and was shot in the back of the head The killings were claimed by dissident IRA groups who believe, or pretend to, that the mainstream movement sold out its republican heritage in doing a deal with the unionists, to say nothing of the British A shudder ran round the

province at the thought that the Troubles might not, after all, be over

Yet the striking thing is not that uniformed men once again lie dead in the streets of Northern Ireland, though the Good Friday agreement in 1998 supposedly put paid to politically motivated violence It is that the people of the province, not least the leaders of its main parties (after a gulp on the part of Sinn Fein), united to condemn the killings The most moving sight of the past week, after the grief of the bereaved families, was that of Peter Robinson, the Democratic Unionist first minister, Martin McGuinness, the Sinn Fein deputy first minister and former IRA strongman, and Sir Hugh Orde, the English boss of the Northern Ireland police, standing shoulder to shoulder outside the Northern Ireland Assembly at

Stormont (see article) In vigils across the province, thousands showed their dismay at the resumption of violence

The hand of history

The vast majority in Northern Ireland support the peace process Most have benefited from the increased prosperity it has brought Devolved government returned to the province in 2007, and old enemies are learning to work together The killers have nothing like the glamour or support that the old IRA did; they are pipsqueak diehards, some of them soaked in garden-variety crime All this suggests that the

outbreak of violence may be a tragic blip

But grievances in Northern Ireland run centuries-deep The transformation of IRA leaders into Sinn Fein politicians does not mean the end of militant republicanism Loyalist paramilitaries, still armed to the teeth, may seek to even up the body-count Trust between old antagonists, on which power-sharing rests, is fragile And there are two particular reasons for concern just at the moment

The first has to do with security and intelligence Although the IRA dissidents appear to have little

support, it doesn’t take many men with arms and experience to wreak havoc The police have been well

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enough informed to foil any number of attempted attacks over the past few years More recently,

however, Sir Hugh gave warning that the terrorist threat was growing and asked (controversially) for backup from military intelligence He was right, it seems, to worry about the capacity of his police

service—smaller and less experienced than the Royal Ulster Constabulary that it replaced—to contain the situation The assault on the army base was not foreseen, even though, guarded by poorly armed

civilians, it was a soft target

The economic slump is a second worry The peace process has been tacitly predicated on economic growth Unemployment fell, new businesses multiplied and house prices soared after 1998 This is now changing Northern Ireland’s economy is boosted by a big public sector and by Irish shoppers who flock north to buy Pampers priced in newly cheap pounds But the public sector too will be trimming its

workforce The growing number of those with nothing better to do may find it tempting to join the political malcontents

The best response is not to put British soldiers back on the streets (though their bases do need proper guarding); such a potent symbol of a jackbooted Britain is just what the dissidents need to give them substance It is to carry on undeterred with the peace process and to strengthen Northern Ireland’s own police service, the central pillar of power-sharing

This will require concrete measures On March 11th the British Parliament passed a law paving the way for devolution of responsibility for policing and criminal justice to Stormont The Northern Ireland

Assembly must now vote in favour if it is to be implemented Sinn Fein is committed to doing so; the Democratic Unionists have been slower to accept this deeply symbolic transfer of authority from Britain, insisting on further proofs of loyalty from their partners in power Substantial help from former members

of the IRA as the police run down the dissident killers would serve everyone’s interests

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On transparency, sex education, Latvia, California, needles, Kenya, manufacturing

Mar 12th 2009

Shining some light

SIR – Certain assertions in your article on transparency in financial markets deserve to be reconsidered (Economics focus, February 21st) You describe transparency as amorphous, criticise it as costly and say

it takes second place to trust in the money markets It is hardly surprising that shortcomings may arise from inaccurate, immaterial and incomparable publicly available information, but transparency as a principle cannot be blamed A hefty prospectus veiled in legal jargon should not be considered a

transparent tool of disclosure; it is a means of obfuscation The sheer complexity of repackaging

subprime loans to achieve AAA credit-ratings is indicative of efforts to deceive through disguise

Trust in financial markets vanished when the lack of transparency became apparent; it is only through transparency that investor confidence and public trust can be won back As for “symmetry”, some investors will always be able to use information better than others, but this information should be

available to all Transparency leads to a level playing field

The failure of the markets has resulted in massive bail-outs By comparison, the costs of disclosure in well-regulated markets are borne by all those who promote a risk, or transfer it to others From

preventing excessive short-term risk-taking to exposing potential conflicts of interest, transparency is key to ensuring that confidence is restored

Huguette Labelle

Chair Transparency International

Berlin

We are all only human

SIR – I read the comment in your article on sex education in America that “abstinence-only education programmes have been controversial ever since they were introduced under Ronald Reagan in

1981” (“Just say no”, February 14th) It is about time that Reagan’s sex-education policies were

reversed They have been a disaster, responsible for both the spread of disease and an increase in unwanted pregnancies and abortions in America, even more so in Africa However, you should have pointed out that Reagan himself wasn’t maybe the best exemplar of his policy, having got Nancy

pregnant before he married her

programmes is planned to increase between 2008 and 2009 in absolute terms, as a percentage of GDP, and as a share of total outlays

Pensions will not be changed this year and will be indexed to inflation next year, at the same time as public-sector employees are set to see substantial reductions in their nominal salaries Under the

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programme the Latvian authorities will also improve the targeting of spending to develop social safety nets This is consistent with the objective of increasing competitiveness under Latvia’s fixed exchange-rate regime, while also protecting those who are most vulnerable.

Hang on a minute That sounds remarkably like the ten years leading up to the recession in Britain I’m

no expert on Latvian economic history but it seems rather harsh to blame Latvia’s rulers, who were probably doing no more, in their new-found freedom, than emulating what they doubtless perceived as the conventional wisdom of Western capitalist policies

personal experience First, it is not congressional Democrats who have given our state “the most

dysfunctional politics in the country”, it’s our muscle-headed Republican governor, and a cabal of clinging Republican legislators

dogma-Next, as a middle-class San Franciscan—I am a high-school instructor and my wife is a librarian—happily raising children here, surrounded by other middle-class folks doing the same, I can assure you that my city is not “a playground for the ultra-rich and a sewer for the poor” Finally, it is absurd to suggest that Nancy Pelosi, the speaker of the House of Representatives, is more isolated from the “real” America than the Texan suburbanites she replaced just because she has a house in Pacific Heights For one thing, it is about a ten-minute walk from her house to my daughter’s school, which is 50% African-American

Anyway, if I have to choose between “Californication” and whatever it was that those Texans were doing

to us for the past eight years (I don’t even want to try to think of a word for it) I’ll take our way a dozen times over

Perhaps the photo was used to illustrate that he is, indeed, falling to his left under the burden of

unsustainable social and pork-barrel spending Alternatively, the “coffin” is no more than an empty polystyrene box designed to deceive Californians into believing he has got firm control of the dead weight the state imposes on its beleaguered taxpayers, and that the budget is as firmly balanced as he is Either

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way, it augurs ill for Californians

Second, from a public-health perspective, people who inject insulin are a far lower risk group for borne viruses such as HIV and hepatitis, particularly hepatitis C Estimates indicate that approximately 85-90% of those with hepatitis C in Britain acquired the virus through injecting illicit drugs Although the prevalence of HIV among injecting drug users in Britain is low compared to many other European

countries there are concerns that it may be rising In addition to the concerns about rising rates of borne viruses among illicit-drug users, there is a strong correlation between illicit-drug use and crime, homelessness, health inequality, isolation from health services and chaotic lifestyles

blood-Needle and syringe programmes represent an important way to try to engage this disenfranchised group People who inject insulin, on the other hand, tend to be in close contact with health services The

requirement to obtain insulin via prescription ensures at least some engagement with health

professionals, and in fact the majority of people living with type-one diabetes have access to a wide range of specialist service provision

Third, it is important to note the context in which NICE produces its guidance The piece of guidance in question was produced in response to a specific referral from the Department of Health and it sets out to provide specific guidance on this topic People living with diabetes who inject insulin are not covered by the recommendations in this guidance To date, NICE has not been asked to produce guidance on the provision of injecting equipment and sharps disposal to people living with diabetes

Professor Mike Kelly

SIR - I would like to respond to your review of a book by Michela Wrong on Kenya (“How to ruin a

country”, February 28th) Despite Ms Wrong’s charges to the contrary, Britain’s Department for

International Development (DFID) has zero tolerance for corruption in Kenya and globally Corruption hits poor people hardest, and undermines development, the rule of law and investor confidence The best checks on corruption are strengthening governance and supporting citizens to speak out against it

DFID’s programme in Kenya does just this, including assisting groups that investigate the way Kenyan taxpayers’ money is spent, such as the National Taxpayers’ Association and Transparency International (previously headed by John Githongo, with whom we still work closely)

During the period highlighted in Ms Wrong’s book, DFID officials worked with the British high commission

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in Nairobi on the aid programme, British law-enforcement efforts and British visa exclusions for suspect Kenyan politicians The notion that DFID officials sought to undermine anti-corruption efforts is nonsense More needs to be done Ordinary Kenyans are increasingly vocal in demanding high-level prosecutions and an end to the culture of impunity in their country The British government remains fully committed to supporting them to tackle the misuse of public money I would challenge your reviewer, and Michela Wrong, to suggest constructive alternatives to the policies we are currently pursuing to combat

corruption in Kenya

Ivan Lewis, MP

Department for International Development

London

What to make of it all

SIR - As the boss of a British manufacturing company, you may be surprised that I support your leader warning against government intervention in manufacturing (“The collapse of manufacturing”, February 21st) Our company has grown over the years but now, like so many others, is being affected by the global slowdown

However, I will not join the clamour for sectoral state aid or add to the nationalistic drum beat from some

in the media and industry for increased economic protectionism My experience is that specialism,

innovation, long-term investment and bright ideas will win through where protectionism and navel gazing will fail

There is one area where government support is welcome however I would appeal to the government to use this opportunity, and any future proposed stimulus packages, to boost investment in R&D,

apprenticeships, training and other measures that will allow British manufacturers to gain their own competitive advantage by competing on “value creation” rather than “low cost” and avoiding

commoditised product/market sectors, which will help shield them and us from future economic woes Keith Attwood

Ana Correa

London

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America and climate change

Sins of emission

Mar 12th 2009

Barack Obama is keen to curb greenhouse-gas emissions with a cap-and-trade scheme Can Congress come round to his way of thinking?

AS HE clinched the Democratic nomination for president last year, Barack Obama declared: “This was the moment when the rise of the oceans began to slow and our planet began to heal.” Not yet two months into his term, despite lots of other pressing concerns, Mr Obama has taken on the task of tackling global warming with zeal (although the oceans nonetheless continue to rise: see article) He has increased government spending on environmental causes, instructed civil servants to increase the fuel-efficiency of America’s cars, promised to double America’s output of renewable energy and urged Congress to pass the greenest measure of them all: a cap on the country’s emissions of greenhouse gases Could Mr Obama live up to his grand green rhetoric?

There is no questioning his enthusiasm He has appointed ardent advocates of emissions-cuts to senior jobs, including secretary of energy and head of the Environmental Protection Agency (EPA) Many of his appointees, such as Carol Browner, who is charged with co-ordinating policy on climate and energy, are veterans of the Clinton administration, which agreed to cut emissions under the Kyoto protocol but could not muster enough support in the Senate to get it ratified

The administration has dedicated roughly a tenth of the $787 billion to be spent under the stimulus bill to energy and the environment, making it “the biggest energy bill the country’s ever seen”, according to Miss Browner That includes $33 billion to green the country’s electricity supply, $27 billion for energy efficiency and $19 billion for cleaner forms of transport Voguish technologies such as renewables

(meaning windmills, solar panels and the like), high-speed rail, carbon capture and storage, advanced batteries, “smart” electrical grids and plug-in hybrid cars all received big dollops of cash

In his first budget, too, Mr Obama has proposed spending more on greenery The EPA would receive a third more than it did last year Some of that is slated for closer monitoring of greenhouse gases The Department of the Interior would get more money to assess the potential for renewable energy and to protect endangered species from global warming; $150 billion would go towards improving green

technology over the next decade

Meanwhile, Mr Obama has directed the EPA to produce tighter fuel-efficiency standards for cars and to

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reconsider its refusal under Mr Bush to allow California to regulate greenhouse-gas emissions from cars The EPA is also wondering whether to overturn another decision from Mr Bush’s day and regulate

greenhouse-gas emissions itself That, in effect, would allow it to set emissions standards for new power plants, and also to raise fuel-economy standards for cars beyond the levels required by existing laws.All this, says Miss Browner, would complement Mr Obama’s broader ambition to tackle global warming through a cap-and-trade scheme, whereby the government would set steadily declining annual limits on emissions, and would then auction permits to pollute up to that level The president has consistently called for such a scheme, most recently in his first address to Congress, and even included revenues from permit auctions in his budget projections Ideally, officials say, they would like to see cap-and-trade enacted this year, in time for a United Nations summit in Copenhagen in December, where negotiators hope to agree on a new treaty to stem global warming

Congress seems receptive to the idea The leaders of both the House of Representatives and the Senate have promised to allow a vote on cap-and-trade this year The relevant committees in both chambers have said they will produce draft bills soon The increased Democratic majority in both houses bodes well, since Democrats are keener on environmental measures, on the whole, than Republicans But Environment & Energy Daily, a website that follows congressional wrangling on the subject, reckons there

is not yet a majority in favour of cap-and-trade in either chamber In the Senate, where 60 out of 100 votes are needed, it counts only 47 probable supporters and 21 fence-sitters

The odds of winning over the waverers depend on the details of a cap-and-trade bill But provisions designed to appeal to one lot might put off others One of the most hotly disputed questions is what to

do with the money earned by selling emissions permits Some congressmen want it spent on the

industries and households hardest hit by the rises in fuel and power prices that cap-and-trade will

inevitably bring Others want it spent on research into and subsidies for cleaner forms of energy Yet others fear that the government will squander its takings, and so propose returning the money to citizens

in the form of tax rebates or cuts, an idea known as cap-and-dividend The president proposes a mixture

of all three approaches

The role of administrative measures is also up in the air Mr Obama has repeatedly argued that it would

be better for Congress to take charge of emissions than for the EPA to regulate them under the Clean Air Act, as the Supreme Court has said it can But while Congress ruminates, the EPA is going ahead with measures that will have a bearing on emissions from vehicles in particular Some congressmen might prefer to leave the reduction of emissions from transport up to the bureaucrats at the EPA rather than be seen to increase the price of driving—a red rag to many voters

The volatility of carbon markets is another worry In recent months the price of an emissions permit in the European Union, where a cap-and-trade system has been up and running since 2005, has reached a peak of over €30 and a trough of less than €10, thanks to the sour economic outlook Analysts fear that such wild swings will make businesses reluctant to invest in low-carbon technology

One solution is to adopt a tax on carbon instead of a cap-and-trade scheme But that idea has little support in Congress, despite endorsements from Al Gore, America’s climate-crusader-in-chief, Exxon Mobil, its biggest oil firm, and this newspaper Alternatives doing the rounds include setting reserve prices for emissions permits at auction and creating a “Federal Reserve of carbon”, which would manage the supply of permits—or try to—much as its namesake manages America’s money supply

Moreover, higher energy costs would be unevenly spread States with lots of heavy industry, and

especially those where coal fuels most power plants or provides lots of mining jobs, will suffer most Many of the waverers in the Senate come from such states, primarily in the Midwest; much of the

congressional leadership comes from coastal states with less to lose

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The “Gang of 15”, a group composed mostly of wary Midwestern senators, say they will not vote for and-trade unless their concerns about the economic impacts on their constituents can be assuaged They might be mollified by a generous slug of auction revenues for their states, or a mechanism to cap the price of permits, or a rule that allowed extensive use of cheap international offsets in lieu of emissions cuts at home But those fixes would upset both fiscal conservatives and environmental hawks.

cap-In theory, the cap-and-trade system automatically minimises the cost of reaching any given emissions target, by allowing whichever firms can reduce their emissions most cheaply to do so on behalf of others, using whatever technology they like But neither Mr Obama nor the Democratic leadership in Congress wants to leave things entirely to market forces They all support the idea of obliging utilities to generate

a certain proportion of their output—perhaps 15% by 2020—from renewable sources, for example, and want such a rule included in a cap-and-trade bill

As several sceptical congressmen have noted, this “renewable portfolio standard” is redundant at best, in

so far as utilities constrained by an emissions cap would choose to invest in renewables anyway At worst, it will oblige utilities to invest in renewables when there are cheaper low-carbon alternatives available, and so add to the cost of cutting emissions Ed Markey, the chairman of a House committee that focuses on climate change and energy security, disagrees He wants to force utilities to invest not only in renewables, but in energy efficiency too

The president and Congress are also keen to complement cap-and-trade with subsidies of various kinds The main beneficiary, again, is renewable electricity The stimulus bill extends the life of an existing tax credit for investments in it It also allows developers to swap that credit for a grant from the

government, since the credit is of use only to firms that are making taxable profits—a rare thing these days In addition the bill sets aside $6 billion for loan guarantees for renewable projects, to add to the money originally allocated for the same purpose in 2005, but never used, and further funds proposed in the latest budget On top of all that, the stimulus allocates billions to upgrade the grid, a step that will help bring power from remote wind farms and solar plants to big cities

Most of these measures would be unnecessary if a cap-and-trade scheme were in place Extending the tax credit, for example, would stimulate only slightly more investment in renewables than a cap-and-trade bill, at greater expense to the government, according to a recent study by the Peterson Institute for International Economics and the World Resources Institute, two think-tanks Unless most subsidies for renewables are phased out once a cap-and-trade system is in place, says Paul Bledsoe, a former adviser on energy to the Clinton administration, they risk creating a boondoggle akin to the proliferation

of incentives for corn ethanol If taken too far, such handouts tend to become a crutch rather than a

leg-up, and can end up sapping public support for the policy

The Department of Energy’s loan-guarantee scheme certainly has the potential to create a bonanza The

$6 billion budgeted should allow it to back loans worth $60 billion, assuming a default rate of around 10%, says an official That, in turn, should prompt $120 billion in investments This comes on top of $10 billion in loan guarantees for renewables initially authorised by the Energy Act of 2005, but not yet disbursed Guarantees are also on offer for new nuclear plants and coal plants with low emissions

The department says it aims to pick projects in as transparent and objective a manner as possible, and

to concentrate on projects that were well advanced, but collapsed when finance dried up as a result of the credit crunch But those, arguably, are the least in need of government support And with such a lot

of money to spend, the bureaucrats will need to cast their net quite widely

In general, the emissions cuts picked by politicians are far more expensive than those chosen by the private sector The study by the two institutes puts the cost of every tonne of emissions avoided thanks

to the provisions of the stimulus bill at somewhere between $69 and $137 PointCarbon, by contrast, estimates that the carbon price under the sort of cap-and-trade bill the president envisages will be roughly $13 a tonne

Congress is unlikely to swallow the castor oil of cap-and-trade without such sweeteners, Washingtonians say But the more lavish the subsidies, the more expensive cutting emissions becomes—and the harder for voters to stomach

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The economy

Pursued by Obamabears

Mar 12th 2009 | WASHINGTON, DC

Investors fret that President Obama’s crisis response is not up to the task

BARACK OBAMA has modelled his early days on those of Franklin Roosevelt, the last president to take office during a serious economic crisis But by one benchmark he is failing At market close on March 11th, despite a rally this week, the Dow Jones Industrial Average was 16% below its level on the Friday before Mr Obama took office At this point in Roosevelt’s presidency, 54 days in, it was up 35%

The “Obama bear market,” as conservative commentators have gleefully labelled it, has been blamed on two things: on the new president trying to do too much, and on his failure to do more There is,

paradoxically, truth to both assertions

Conservatives have attacked Mr Obama’s budget proposals as a wealth-destroying combination of

increased government intervention and higher taxes In truth, he had long promised to spend more on health care and alternative energy and to raise taxes on the rich, so little in the budget should have surprised investors

A bigger dent to confidence comes from Mr Obama’s style, not his substance His many backers on Wall Street had taken his conciliatory manner and selection of centrist economic advisers as evidence that he would govern moderately despite, as a senator, having consistently voted on the left They have been taken aback by his combative tone On February 28th, for instance, he declared that “special interests and lobbyists” were “gearing up for a fight [and] so am I.” Earlier, he said bankers could not take their bail-out money and “pad their paychecks or buy fancy drapes or disappear on a private jet.” Bankers fear this demonisation is driving down their share prices Confidence has also been rattled by plans to pass a bill letting unions organise without a secret ballot

Illustration by David Simonds

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But the Obamabears’ biggest fear is that Mr Obama’s remedies are not up to the task of fixing America’s deepening recession To be sure, Mr Obama’s team has had a huge $787 billion stimulus package

passed, begun evaluating banks’ need for more government capital, and unveiled a plan to reduce

mortgage foreclosures But in the meantime, the outlook has deteriorated sharply and the administration has still not decided how to get bad loans off banks’ balance sheets Andrew Grove, the former chief executive of Intel, the world’s biggest microchip-maker, advised Mr Obama this week to “rein in the chaos” of differing financial fixes before moving on to health care and energy Critics say Mr Obama is trying to do too much at once

Administration officials appreciate the urgency for action In his budget, Mr Obama said he may need another $750 billion to stabilise the financial system, though the popular perception that the $700 billion has achieved little decreases the chances of his getting it Tim Geithner, Mr Obama’s treasury secretary, reportedly abandoned plans for a “bad bank” to get distressed assets off the books of the financial

system and help restart lending because of the political cost

Mr Geithner’s own efficacy has been hamstrung by the fact he remains his department’s only confirmed official: 17 other top Treasury jobs requiring Senate approval remain vacant In 2007 the Treasury website listed 120-odd officials, from Hank Paulson, the then treasury secretary, down The current version of the same webpage lists just one: Mr Geithner Candidates for the top jobs have been delayed or discouraged by Mr Obama’s gruelling background checks, made more so by Mr Geithner’s own tax problems, and the cloud over anyone who worked on Wall Street, meaning most of those with

Senate-practical experience relevant to the crisis

All this has left foreign officials and domestic bankers frustrated at the lack of consultation from the Treasury Some foreigners say planning for the G20 meeting in London next week is being affected (see article) “They’re overwhelmed,” says Ken Lewis, chief executive of Bank of America The administration disputes this but admits unprecedented demand for Treasury officials’ attention

Whatever the cause, the strain on the Treasury is encouraging the view that Mr Obama’s agenda is being driven by political advisers and Congressmen, both more attuned to voters’ rage than to market

confidence Chris Dodd, who faces a battle to retain his Connecticut Senate seat in 2010, inserted tough new restrictions on bankers’ pay into the fiscal stimulus package despite the administration’s objections Since then, a series of mostly small banks have said they will return bail-out money, frustrating the plan

to increase the banking system’s capital and lending capacity

For their part the Republicans have been able to shift the debate away from the need for government spending to dodgy examples of it The Democrats had to fight hard to pass a $410 billion bill to finance the remainder of the current fiscal year this week, in part thanks to blistering attacks by Republicans on its 8,500 “earmarks”—pet projects inserted by legislators—though they total less than $8 billion

William Galston, a former aide to Bill Clinton, this week advanced two “equally depressing” theories for why Mr Obama’s team has not more forcefully addressed the crisis: “Either they do not know what to do,

or they do not believe they can muster the political support to do what they know needs to be done.” He advised Mr Obama to focus his attention on the crisis, or risk the loss of confidence Jimmy Carter

suffered three decades ago That would bring Obamabears out in droves

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Science and the president

A new era of integrity, sort of

A science-friendly president overstates his case

DURING his campaign, Barack Obama promised to end two wars The one in Iraq smoulders on But “The Republican War on Science”, to borrow the title of an influential book, is now over On March 9th, as he lifted some restrictions on federal funding for stem-cell research, Mr Obama spoke of “restoring scientific integrity to government” From now on, he said, scientists will be “free from manipulation or coercion,” and the government will “[listen] to what they tell us, even when it’s inconvenient.” Unlike a certain ex-president, Mr Obama will ensure “that scientific data [are] never distorted or concealed to serve a

The stem-cell controversy is also complex Stem cells are cells that have yet to decide what they want to

be That is, they can grow up to become skin cells, muscle cells or nearly any other type of cell The most versatile ones are derived from embryos Scientists hope that experiments using embryonic stem cells will help treat diseases such as Parkinson’s and cancer But such experiments destroy human embryos,

so right-to-lifers object In 2001, Mr Bush ordered that federal funds be used only for experiments on embryonic stem-cell lines that already existed

Several states stepped into the breach: California, for example, set aside $3 billion for embryonic cell research With federal funds soon to flow, some states may now cut back But overall, funding for stem-cell research will surely increase, raising hopes for many sick people

stem-Politics and science will still clash, however Reasonable people disagree about what kind of research is moral Mr Obama, for example, thinks that the use of cloning for human reproduction is “profoundly wrong” Plenty of libertarians disagree Many of Mr Obama’s supporters believe that experiments on animals are immoral Resolving such disputes is a job for elected politicians, informed by science but not dictated to by scientists

Reuters

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Mr Obama likes to duck the thorniest disputes, for example by leaving it to the National Institutes of Health to decide what kind of embryos can be used in federally-funded experiments Should researchers use only embryos left over at fertility clinics, which would otherwise be discarded? Or may they create embryos specifically to experiment on? Mr Obama did not say

Other controversies loom Many scientists doubt that “clean coal” technology is a practical way of tackling climate change But there are coal mines in swing states, so Mr Obama loudly supports it Drug firms say

Mr Obama’s efforts to squeeze drug prices will deter innovation A recent Supreme Court ruling could do the same: it allowed a patient to claim damages from a drug firm when, despite six warnings not to inject an anti-nausea drug into an artery, a doctor’s assistant did just that

Meanwhile, Mr Obama’s vow never to fiddle data rings a little hollow Last week, for example, he declared

that “[t]he crushing cost of health care causes a bankruptcy in America every 30 seconds.” The

Economist credulously repeated this claim But it is false The study on which it is based found that

number of bankruptcies in 2001 from all medical-related causes, not just the cost of health care That includes people who could not work because they were sick In politics, all too often, eloquence trumps accuracy

Good to go

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Barack Obama and education

The teacher-in-chief speaks

But will the states listen?

GEORGE BUSH’S education secretary, the splendidly-named Margaret Spellings, used to say that since the federal government provided 8% of the funds for public schools, it should have an 8% say in how they were run She meant to sound optimistic; but she only reminded people just how little influence Washington has

For those who listened carefully, that was the underlying theme of Barack Obama’s big schools speech on March 10th He promised that “America’s entire education system [will] once more be the envy of the world.” But the plans he laid out for achieving this goal consisted largely of pleading with states and school districts—which actually run the show—to do a better job

“Let’s challenge our states to adopt world-class standards,” he said, putting his finger on a huge problem Currently, the federal government tosses bundles of cash at states where children improve their test scores Since there is no central control of standards, states can get free money simply by making tests easier to pass

As Mr Obama lamented, fourth-grade (ie, nine-year-old) readers in Mississippi can score 70 points worse than their peers in Wyoming and receive the same grade The Fordham Institute, a think-tank, measured the same 18 primary schools by different states’ benchmarks In rigorous Massachusetts, only one

passed muster In sloppy Wisconsin, 17 did Mr Obama promised that, later this year, he would tie

federal money to results But he did not say how

He correctly identified another problem: that while most American public schools are pretty good, a significant minority are atrocious He put it more politely, of course, noting that a mere 2,000 high

schools (out of 28,000) produce more than half of all dropouts Dysfunctional schools are concentrated in the rougher parts of cities, such as Detroit and Los Angeles Mr Obama offered some sensible small ideas, such as extra money for pre-school, and hinted at bigger reforms

He urged the states, for example, to stop restricting the number of charter schools These are publicly funded but autonomous schools that, freed from bureaucracy, typically educate poor children better for less money than nearby public schools do Naturally, the bureaucrats hate them Many states restrict the number that can be set up “That isn’t good for our children,” said Mr Obama But he cannot force the states to stop doing it

Mr Obama called for longer school hours, which teachers’ unions are not keen on, and merit pay, which they hate Ever tactful, he avoided the incendiary word “merit” But he said that “good teachers will be rewarded with more money for improved student achievement” As for persistently bad teachers, he pointed out that “There’s no excuse for [them] to continue teaching.” Parents would love that; but no president has come close to achieving it

Meanwhile, Democrats in Congress quietly voted to kill a voucher programme that allows around 1,700 students, mostly black, poor or both, to escape Washington, DC’s, awful public schools and attend private ones Mr Obama supports killing the programme, but his flacks say he wants the students currently enrolled in it, who include two at his daughters’ excellent private school, to be allowed to complete their studies How kind

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The death penalty

Saving lives and money

Mar 12th 2009 | NEW YORK

States plagued by fiscal woes rethink their stance on the death penalty

AN EYE for an eye, or at any rate a death for a death, is the type of justice that most states still

embrace Only 14 of the 50 states have banned capital punishment But that may change with the recession As state governments confront huge budget deficits, eight more states have proposed an unusual measure to cut costs: eliminate the death penalty

The states considering abolition, including Colorado, Kansas, New Mexico and New Hampshire, have shifted the debate about capital punishment, at least in part, from morality to cost Studies show that administering the death penalty is even more expensive than keeping someone in prison for life The intensive jury selection, trials and appeals required in capital cases can take over a decade and run up a huge tab for the state Death row, where prisoners facing execution are kept in separate cells under intense observation, is also immensely costly

A recent study by the Urban Institute, a think-tank, estimates that the death penalty cost Maryland’s taxpayers $186m between 1978 and 1999 According to the report, a case resulting in a death sentence cost $3m, almost $2m more than when the death penalty was not sought

In an age of austerity, every million dollars counts Proponents of the abolition bills describe the death penalty as an expensive programme with few benefits There is little evidence that the death penalty deters In fact, some of the states that most avidly execute prisoners, such as Texas and Oklahoma, have higher crime rates than states that offer only life in prison without parole There is also the danger that innocent people may be put to death So far, more than 130 people who had been sentenced to death have been exonerated

Colorado, one of the states that has introduced a bill to overturn the death penalty, intends to spend the money it will save each year by eliminating capital punishment on an investigations unit According to Paul Weissman, the state House majority leader and the bill’s co-sponsor, around 1,400 murders are still unsolved in the state Eliminating the death penalty will finance the new unit and leave an extra $1m for other state programmes Other states are trying to free up funding to help offset their huge deficits Savings from abolishing the death penalty in Kansas, for example, are estimated at $500,000 for every case in which the death penalty is not sought

Many other states, including Texas, which last year carried out almost half of all executions in America, have no plans to follow suit But a prolonged recession may change a few Texan minds

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Africa policy

Don't expect a revolution

Mar 12th 2009 | NEW YORK AND PRETORIA

Barack Obama may differ little from George Bush in his approach to Africa

IT MIGHT seem obvious that American policy towards Africa would change under America’s first American president But while the new man seems set to break with his predecessor in many other foreign-policy areas, changes towards Africa may be less substantial

African-Though unloved in much of the world, George Bush is still popular in most of Africa He vastly increased America’s development aid towards the continent He created the President’s Emergency Plan for AIDS Relief (PEPFAR), which was reauthorised last year with a budget of $48 billion over five years, to help stop the spread of HIV and to treat those infected While PEPFAR has been less successful at prevention than its proponents had hoped, it has kept 2.1m people, most of them African, on life-saving

Mr Obama brings with him some big figures with strong opinions on one of Africa’s bloodiest conflicts, in the Sudanese region of Darfur Joe Biden, his vice-president, has called in the past for a threat of military action against the Sudanese government to stop the killings there Mr Obama’s ambassador to the UN, Susan Rice, has backed the threat of force too Samantha Power, who has joined Mr Obama’s National Security Council, is a historian of genocide who, though she believes in toughening sanctions and

divestment from Sudan, opposes military intervention If the conflict worsens, Mr Obama could face difficult choices

But here too there may be more continuity than change The

International Criminal Court at The Hague recently indicted Omar

al-Bashir, Sudan’s president, for war crimes Mr Bush vociferously

opposed the court But he could be pragmatic about it if it suited

American policy; his ambassador to the UN abstained when the

Security Council first referred Sudan to the court So the Obama

administration’s position is not entirely new, though a call from a

popular new black president to African leaders, asking them to

shun an indicted war criminal, may be harder to ignore

On Somalia, another of the continent’s nastiest conflicts, Mr

Obama is likely to be cautious Mr Bush backed Ethiopia almost

unconditionally when it invaded Somalia to overthrow an Islamist

regime Mr Obama may shift tack a bit, perhaps slightly edging

away from the Ethiopian regime, but will be as wary as Mr Bush

of getting involved in Somalia

Kenya has long been one of America’s key African allies Since a disputed election at the end of 2007, it has been floundering under a shaky coalition government (see article) If violence returns, its people may expect Mr Obama, whose father was Kenyan, to wave his wand But however strong his family ties, he is unlikely to get deeply embroiled

Nor, given the parlous state of America’s economy, is he likely to increase aid to Africa much He is treading softly, knowing that none of the conflicts in Congo, Somalia, Sudan or Zimbabwe has an easy

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solution He may urge South Africa to squeeze Robert Mugabe out of power But America has no

particular influence over these places Besides, Mr Obama has yet to name his assistant secretary of state—the top appointment—for Africa; other assistant secretaries, for apparently higher-priority regions, have already been tipped

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3D viewers

The final reel

Mar 12th 2009 | ST LOUIS

Goodbye to the Grand Canyon in 3D

A PIECE of the American experience has faded away Fisher-Price, the toy company that used to market them, has just eliminated almost all the View-Master titles that have been a staple of young lives for almost 70 years

The boxy binocular-style viewers remain; but the circular reels that brought three-dimensional images of the world to millions have now been cut back to a handful of children’s titles Long before the internet, or even before most people had colour televisions, View-Masters gave millions a full-colour, three-

dimensional view of the world

View-Masters were introduced at the 1939 New York World’s Fair and became an overnight sensation During the second world war the armed forces produced training reels for identifying enemy and friendly aircraft and ships After the war View-Masters became household items, as common as frozen food Thousands of businesses promoted themselves using custom-made View-Master reels Recently the University of Missouri football programme promoted its candidate for the Heisman trophy by giving away viewers moulded in the college colours and a reel of highlights from the season Medical students used View-Master to study a 3D atlas of human anatomy In all, more than 1.5 billion reels have been

produced, every one of them to the same size and format, and usable in every model of viewer ever made

The gutting of the View-Master comes just as 3D is experiencing a renaissance Improved technology has made 3D films much easier to produce and view, allowing them to progress far beyond the gimmicky thrusting of objects into the audience seen in films briefly in vogue in the 1950s The Jonas Brothers, the latest boy band for teenage girls, recently released a concert film in 3D and also appeared on a 3D magazine cover Several commercials aired during the Super Bowl, the climax of the football season, were broadcast in 3D George Lucas is said to be toying with the idea of re-releasing the “Star Wars” saga in a retrofitted 3D format; recent blockbusters, including “Kung Fu Panda” and “Beowulf” have appeared in 3D versions at special cinemas, with many more to come But the experience of 3D in your hand, which the View-Master made possible, is now a thing of the past

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Pennsylvania's burning mines

Fire in the hole

Mar 12th 2009 | WILKES-BARRE, PENNSYLVANIA

What to do about smouldering acres underground

THE legend blames a lantern forgotten by a miner at the end of his Friday shift When he and his

colleagues returned to the Red Ash colliery on Monday, they found the mine burning That was way back

in 1915 But the fire still burns

Smoke rises from vents and gaping holes in a scrubby hillside above Wilkes-Barre The ground remains warm to the touch and the hilltop view looks over a blighted landscape: scrawny trees, ash and the telltale broad scars of strip-mining (deep-coal mining, the type with miners and lanterns, is long gone).Red Ash is the oldest of 36 fires currently blazing in Pennsylvania’s 180,000 acres (73,000 hectares) of abandoned mines The most famous is beneath Centralia, which began in 1962 when residents burned some rubbish on top of an exposed coal seam In 1981 a hole there swallowed an 12-year-old boy; Pennsylvania has since condemned the entire town, relocated almost all its residents and had its postal code revoked Like Red Ash, Centralia’s fire is thought to have enough fuel to burn for many more

decades

Around 850 residents near the Red Ash mines were also moved out, though today a trailer park sits just

a few hundred yards from numerous vents and smoking crevasses Evacuating people has proved

cheaper than trying to put the fires out The intricate subterranean network of tunnels and anthracite veins makes extinguishing them both expensive and uncertain to succeed—politically, a losing

combination

But GAI Consultants, a Pittsburgh-based engineering firm, has a solution, successfully employed at the Percy colliery in western Pennsylvania From a mixture of ash, lime and sludge left over from coal-fired power plants, they created a concrete-like substance, 119,000 cubic yards (91,000 cubic metres) of which they pumped into the mine This both contained the fire and starved it of oxygen

Unfortunately, the concrete-like substance travels poorly: it begins to harden soon after being mixed, limiting its use to those mines which happen to be near coal-fired power plants—and like mines

themselves, these are a disappearing species in Pennsylvania Besides, Percy was a relatively small fire; Centralia currently covers 600 acres, and could expand to 5,000, making even token efforts to extinguish

it prohibitively expensive

“When we were pulling [coal] out of the earth,” says Tom Rathbun, of Pennsylvania’s Department of Environmental Protection, “it was America’s natural resource Now that it’s over, it’s Pennsylvania’s problem.” The Red Ash fire looks set to supply the fireworks for its own centenary

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The border

Hoping for a silver lining

Mar 12th 2009 | MCALLEN, TEXAS

The poorest part of Texas prepares for the bad times

AT HIS old job, Christian Garcia made root beer at a restaurant

for $9 an hour He thought the pay was too low; in any other city

he would have expected $13 But he lives in McAllen, a border

city in Texas with no shortage of workers He reckoned that if he

objected, he would have zero dollars an hour Anyway, he was

soon able to find another job, at a stylish new seafood restaurant

downtown All things considered, he was confident about the local

economy

Many Americans wish they felt so serene But Mr Garcia’s attitude

is not uncommon in Hidalgo County, which encompasses McAllen,

Mission, Edinburg, Pharr, and a handful of other towns in Texas’s

Rio Grande Valley

The Valley has historically been, and remains, one of the poorest

parts of the country And, like most places, it is feeling the pinch

In January, according to the Texas Workforce Commission, unemployment in the McAllen metropolitan area (which includes all of Hidalgo County) hit 10.1% That is well above the Texas average of 6.8%, and almost three points higher than the year before

But unlike many pinched places, McAllen has cause for a degree of optimism In 2008, according to RealtyTrac, a property analyst, the McAllen-Edinburg-Pharr market had one of the lowest foreclosure rates in the country A January study commissioned by the United States Conference of Mayors predicts that McAllen-Edinburg-Mission will be one of only three metropolitan areas to add jobs this year—out of

363 (The area promptly lost hundreds of jobs that month, however.)

And locals have a different perspective on the recession from their counterparts in wealthier parts of the country McAllen’s situation was worse not so long ago Keith Patridge, the president of the McAllen Economic Development Corporation, moved to Hidalgo County in 1982 At the time McAllen’s main

industries were retail, tourism and farming, and each was in trouble The devaluation of the Mexican peso

in the 1980s put a damper on cross-border shopping; local tourism was down because of the recession

In 1983 a freeze took out much of the Valley’s citrus crop

In the mid-1980s, fuelled by trade and the growth of the maquiladora programme (in which components

are shipped to Mexico, assembled and shipped back), things began to pick up in Hidalgo County McAllen sits across the border from Reynosa, a large manufacturing centre After the peso devalued it became easier to woo companies to put their plants in Mexico with support operations in Texas Workers came for jobs Winter Texans returned to enjoy the sun and practise their square-dancing And Mexicans came to spend money Thanks to tourist dollars, McAllen has the highest retail spending per capita in the state, says its Chamber of Commerce The result was unprecedented growth, and Hidalgo County’s population soared from about 280,000 people in 1980 to over 700,000 in 2007

In the past few months that growth has been checked Shrivelling access to capital threatens further development, and manufacturers have been hit hard over the past year The retail sector is also suffering because the peso has once again dropped against the dollar, though McAllen is still a shopping hub There are more serious problems, such as Mexico’s crumbling security situation Gang violence has Reynosa in high alarm, though it has yet to spill across the border And parts of Hidalgo County remain

desperately poor Thousands of people still live on the outskirts of town in colonias, unincorporated

neighbourhoods without basic services

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But, all things considered, Hidalgo County is optimistic Cynthia Brown of the University of Texas-Pan American, in Edinburg, predicts that McAllen is primed to resume its growth once the economy improves Its population is young, and its position on the border makes it a strategic spot for several industries The city is even working to develop a central entertainment district, in hopes that McAllen will someday compare to Austin as a destination for young professionals That is a stretch But McAllen should weather the recession well enough

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Le vieux canard

Mar 12th 2009

More nonsense about Europe and America

A SPECTRE is haunting the United States—the spectre of Europe Republicans such as Newt Gingrich, the grand old man of the party, and Mike Pence, one of its firebrands, say that Barack Obama’s Democrats are imposing “European-style socialism” on America “As they try to pull us in the direction of

government-dominated Europe,” says Mitt Romney, arguably the front-runner for the Republican

nomination in 2012, “we’re going to have to fight as never before to make sure that America stays America.”

This sort of sentiment is not confined to the cave-dwellers of the right Roger Cohen, a liberal New York

Times columnist, worries that “one France is enough” Kenneth Rogoff, a Harvard economist, says “I take

the 2008 US elections as marking a turn toward continental Europe.” Six years after Robert Kagan

claimed that “Americans are from Mars and Europeans are from Venus”, there is a growing feeling that the two planets are destined to merge

But are they? They are certainly getting a bit closer Mr Obama is raising taxes on the rich, bailing out failed businesses, tackling climate change and dramatically increasing public spending A decade ago American government spending stood at 34.3% of GDP compared with 48.2% in the euro zone, a gap of

14 points; in 2010 it is expected to be 39.9% of GDP compared with 47.1%, a gap of less than eight

points, according to Newsweek

What is more, Mr Obama’s rise has coincided with a softening of American exceptionalism America is

unlikely to repeat George Bush’s America über alles foreign policy in the near future A growing number

of states have imposed moratoriums on the death penalty Support is growing for everything leftish, from tackling global warming to letting gays marry

Still, the two planets have a very long way to travel before they meet Consider a horrific event at a First Baptist Church in Illinois on March 8th An unknown assailant pulled out a semi-automatic weapon and started firing at the preacher The preacher managed to deflect the gunman’s first four rounds using his Bible, sending a confetti-like spray of paper into the air, but was eventually felled That is not the sort of thing that goes on of a Sunday in Tunbridge Wells

Illustration by KAL

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